Economic Sector

Last updated: Wednesday, May 15, 2019


Private Economy Plays Outstanding Role

Posted: Thursday, March 14, 2019

The Vietnamese business community is undergoing a transitional period with opportunities and challenges, both internal and external, emerging. Favorable conditions comes from successes achieved amid better macroeconomic performances, while challenges emerge particularly for the private sector.

Tremendous growth in retail industry

According to the FAST500 Rankings, the list of 500 fastest growing companies in Vietnam in 2019 released by Vietnam Report Joint Stock Company in collaboration with online VietNamNet Newspaper, the compound annual growth rate (CAGR) of FAST500 companies was 38% in 2014 - 2018.

By economic sector, the private sector played a driving role in this period, with its CAGR topping out at 39.6%, far beyond other two areas. The private sector also accounted for the largest share in the FAST500 Rankings, with 81.4% of companies. In addition, the foreign direct investment (FDI) sector had the same growth pace as the State economic sector. This is clear evidence for the outcome of FDI attraction in Vietnam in the past period.

By industry, Vietnam market witnessed a strong expansion of the retail industry. This sector outstandingly expanded 63% in 2014 - 2017, topping five double-digit growing industries. Besides, agriculture, steel, mechanics and telecommunications, informatics and information technology still maintained a high CAGR growth of over 44%. Construction, building material and real estate sectors secured the biggest presence on the rankings list, accounting for 30% of the total. Thus, these factors partly portrayed the current market picture with great growth potential from strong performers like real estate and retail sectors which are expected to become promised lands for investment flows.

The survey also showed that most companies were optimistic about business results in 2018 (85.6% of respondents believed higher revenue in 2018 over 2017 and 64.3% expected higher earnings.) With this high optimism, nearly 70% planned to expand their business operations in the next phase.

In the past five years (2014 - 2018), the growth of domestic and regional markets was attributed to the boost to corporate development (60.7%), followed by existing market expansion (42.9%) and infrastructure improvement (39.3%). In two consecutive years, the growth of the domestic and regional markets was the main drive of business growth, in addition to the endeavor of enterprises and the investment and business environment improvement of the State.

New optimistic opportunities

Together with the GDP growth miracle, socioeconomic performance and progressive international integration in 2018, respondents were more optimistic about new opportunities and revenue growth in the domestic market. However, challenges may impede business development in the current context.

Specifically, input cost, rising labor cost/hard personnel recruitment, and the rise of competitors are the three biggest barriers to enterprises. Input cost is of a particular concern of enterprises. Input cost and competition have been challenges to them for years. On the other hand, while administrative procedures were a major concern in previous years, personnel now emerged as a big challenge. This illustrated the effect of the Government-backed efforts for reform and better business climate, and showed business awareness of upcoming business challenges.

To overcome challenges and grasp growth opportunities, businesses all define their clear strategic directions. Accordingly, three main priorities in their business strategies are orderly revenue to profit growth in current markets (71.4%), cost reduction (50%) and productivity growth (46.4%). Additionally, expanding into new markets and introducing new products/services are also priorities for enterprises.

Specially, to improve growth prospects, product/service quality, reasonable prices and human resource quality are top focuses of businesses. As for personnel, many have opted for strategic automation solutions to automate certain functions and trained employees in using data to build an adaptive workforce and increase profitability in the digital age.

As for good performing industries in the next three years, Top 5 industries are information technology, organic agriculture, tourism - hospitality, clean technology, and retailing. Compared to business opinions in the previous year, the above industries all have strong potential. This is also illustrated in current development trends and orientations of domestic enterprises which aim to promote technology development, environmental protection, clean agriculture and tourism.

Notably, in the FAST500 Report, administrative procedures and corporate income tax are always major headaches for both businesses and policymakers. Besides top expectations: “Further reforming administrative procedures” and “Further reducing corporate income tax”, “Lowering credit rates” is expected to make positive progress in 2019. For businesses, these policy recommendations need to be given top priority to support business operations and growth prospects in the current period.

Furthermore, “Improving the legal environment” has also become a much-expected policy of enterprises since 2017. According to many experts, this is key to open up all doors to successful integration, grasp opportunities that CPTPP and other trade agreements bring, and, at the same time, stabilize the foundation to achieve sustainable growth goals.

Top 10 on FAST500 Rankings 2019:

1. Thanh Cong Group Joint Stock Company

2. Transport and Communication Development Investment Corporation

3. Petrolimex Tanker Corporation

4. Newtecons Investment Construction Joint Stock Company

5. An Tien Industries Joint Stock Company

6. Century Land Joint Stock Company

7. LDG Investment Joint Stock Company

8. Alphanam Investment Joint Stock Company

9. GTNFoods Joint Stock Company

10. Nguyen Minh Steel Joint Stock Company

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